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Are you learning the Forex and looking for a Forex strategy that is simple yet effective?

Many newer traders face the challenge of trying to identify the trend on the intra-day level in order to make their Forex strategy work.

This problem can be alleviated by using the 200 EMA – (Exponential Moving Average).

The 200 EMA is one of the most popular indicators of all time with Forex traders the world over, and for that reason alone is worth noting due to the psychological effect on the market place price can have when hovering around the 200 EMA.

How To Use The 200 EMA

Start using this effective Forex strategy by setting up charts on three different time frames:

4 hour

A 1 hour chart

A 15 minute chart

Now add the 200 EMA indicator to each chart for the 3 time frames. You could color it red or whatever you prefer to make it stand out.

Some like to tile the 3 chart windows in a vertical style so it is easy to compare them side by side. It can distort the chart a little but for this strategy you don’t really need to see the chart in full screen mode.

Now run your eyes over each of the currency pairs you have selected for this strategy.

There are about 9 different currency pairs with a pip spread less than 10, so many prefer just to trade these.

They are:

EUR/USD | GBP/USD | USD/CHF | USD/JPY | EUR/JPY | USD/CAD | AUD/USD | NZD/USD | EUR/CHF

Search through and see if price is going against the 200 EMA on the 15 minute chart on any of the currency pairs.

Take as an example the EUR/USD pair. Make a note of where price is in relation to the 200 EMA on the three different times frames.

If price is well above the 200 EMA on the 4 hour chart, well above the 200 EMA on the 1 hour chart, but BELOW the 200 EMA on the 15 minute chart, price is bucking the trend.

So price is temporarily going against the overall trend and is in a retracement mode.

Look for a good point to get into the market in harmony with the basic trading maxim of selling rallies in a down trend or conversely, buying dips in an up trend.

Using the EUR/USD example, you would look out for a distinctive candle that would indicate possible price exhaustion as it bucks the trend on the 15 minute chart. The probability is it would soon resume moving in the direction of the trend.

This is an easy exercise and it can be done once or twice a day, taking just a few minutes.

Look Out For Price Going Against The Trend

As soon as you see price crossing the 200 EMA on the 15 minute chart whereas it is well beyond the 200 EMA in the opposite direction on the 4 and 1 hour charts, FOCUS! Snatch the opportunity to get into the market and make a profit.

After a little practice you will see how extremely powerful this simple Forex strategy is – certainly deserving a place in your trading tool kit.

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